Question:

How do "Authorized" shares of a Company compare with "Outstanding" shares?

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Let's say a Company has 20Million "Authorized" Shares. The Company currently has 10Million shares "outstanding".

I understand the 20M figure was established by the company's bylaws, but does this mean they can keep selling shares up to the 20M amount?

Let's say they announce a "buyback" or "re-purchase" of 1million shares. Where do these come from? from the 10M total or the overall 20M?

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  1. You are right about the authorized shares being noted in the by-laws or changed by Board meetings.  A company can issue more shares, up to the authorized amount, but usually that requires either a Board or shareholder approval, since it dilutes the value of other shares.

    Buy-backs reduce outstanding shares, but not authorized.  Those shares become "treasury stock", and can then be used by the Company for stock options.  Or the shares can simply be retired.

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